ACIT, Central Circle - XI, Kolkata, Kolkata V. M/s. Greenply Industries Ltd., Kolkata

ITA 1119/KOL/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3112 (ITAT-KOLKATA)
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2013
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 02-08-2012
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Depreciation; Period of limitation; Tangible material; Difference of opinion; Assessment record; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 115JB; 32; 147; 148; 139

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B , KOLKATA [ () . .. . . .. . , ,, , , !' #! $'# #! $'# #! $'# #! $'#, ,, , ] ]] ] [BEFORE HONBLE SRI N.S.SAINI AM & HONBLE SRI M AHAVIR SINGH, JM] '& '& '& '& /ITA NO.1119/KOL/2012 $' !()/ ASSESSMENT YEAR : 2003-04 (+, / APPELLANT ) - ! - ( ./+, /RESPONDENT) A.C.I.T., CENTRAL CIRCLE-XI, M/S.GREENPLY INDUST RIES LTD. KOLKATA -VERSUS- KOLKATA (PAN:AAACG 7284 R) +, 0 1 / FOR THE APPELLANT: SHRI KANHIYA LAL KANAK, JCIT, SR.DR ./+, 0 1 / FOR THE RESPONDENT: SHRI RAJEEVA KUMAR, ADVOCATE 2!3 0 4 /DATE OF HEARING : 04.06.2013 5( 0 4 /DATE OF PRONOUNCEMENT : 07.06.2013. 6 / ORDER PER SHRI N.S.SAINI, AM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-CENTRAL- III, KOLKATA DATED 30.05.2012. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS THAT THE LD. CIT(A) ERRED IN ANNULLING THE ORDER OF THE ASSESSMENT PASSED U/S 147/143(3) O F THE I.T.ACT, 1961. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ORIGIN AL ASSESSMENT WAS COMPLETED U/S 143(3) OF THE IT ACT ON 08.03.2006. SUBSEQUENTLY TH E AO ISSUED NOTICE U/S 148 OF THE ACT ON 31.03.2010 FOR REOPENING THE ASSESSMENT ON T HE GROUND THAT THE ASSESSEE HAD CLAIMED AND WAS ALLOWED DEDUCTION OF RS.2,06,41,310 /- TOWARDS WRITTEN-OFF AMOUNT OF INTANGIBLE ASSETS SHOWN IN THE PROFIT AND LOSS ACCOUNT AS EXTRAORDINARY ITEM. THE AO HAS OBSERVED IN THE RECORDED REASONS THAT DEPREC IATION U/S 32 OF THE ACT AMOUNTING TO RS.77,42,742/- WAS ALLOWABLE TO THE AS SESSEE AS DEDUCTION AND NOT THE ENTIRE AMOUNT OF RS.2,06,47,310/-. CONSEQUENTLY EXC ESS CARRIED FORWARD OF ITA NO.1128 /KOL/2012 ITO,WARD-52(4), KOLKATA VS SRI AVI JIT NASKAR A.YR.2007-08 2 UNABSORBED DEPRECATION OF RS.99,35,146/- WAS ALLOWE D IN THE ASSESSMENT ORDER. FURTHER IN THE COMPUTATION OF BOOK PROFIT U/S 115JB OF THE ACT AN AMOUNT OF RS.2,62,76,653/- WAS REDUCED FORM THE NET PROFIT AS PER PROFIT AND LOSS ACCOUNT OF ADJUSTMENT OF HYPOTHETICAL INCOME CREDITED TO THE P ROFIT AND LOSS ACCOUNT OF THE YEAR AS PER NOTE 2 OF PART B OF SCHEDULE V TO THE AUDITE D ACCOUNTS. SINCE THE SAID ITEM WAS NOT ALLOWABLE AS DEDUCTION AS PER EXPLANATION BELOW SECTION 115JB (2) OF THE ACT THE DEDUCTION OF THE SAID AMOUNT WAS NOT ADMISSIBLE IN COMPUTING THE BOOK PROFIT U/S 115JB OF THE ACT. FURTHER, AN AMOUNT OF RS.10,32,59 5/- DEBITED TO THE PROFIT AND LOSS ACCOUNT ON ACCOUNT OF PROVISION FOR GRATUITY WAS AN UNASCERTAINED LIABILITY AS PER CLAUSE 17(I) OF THE TAX AUDIT REPORT AND HENCE THE SAME WAS REQUIRED TO BE ADDED BACK TO ARRIVE AT THE BOOK PROFIT. THIS RESULTED IN UNDER-ASSESSMENT OF THE BOOK PROFIT BY RS.2,73,09,248/-. IN VIEW OF THE ABOVE STATED UN DER ASSESSMENT OF INCOME NOTICE U/S 148 OF THE ACT WAS ISSUED ON 31.03.2010. THE AO IN THE RE-ASSESSMENT ORDER PASSED ON 24.12.2010 ASSESSED THE INCOME OF THE ASS ESSEE ON THE BOOK PROFIT OF RS.2,23,01,550/- BY ADDING BACK RS.2,62,76,653/- AS EXPORT INCENTIVE AND RS.10,32,595/-AS PROVISION FOR GRATUITY. 4. BEING AGGRIEVED AGAINST THE SAID ORDER OF THE AO THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A) AND CHALLENGED THE REOPENING OF THE ASSESSMENT BY THE AO AS BAD IN LAW. THE ASSESSEE SUBMITTED BEFORE THE LD. C IT(A) THAT THE PRESENT ASSESSMENT YEAR WAS THE A.YR. 2003-04 AND NOTICE U/S 148 OF TH E ACT WAS ISSUED ON 31.03.2010 WHICH WAS BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND THAT REOPENING OF ASSESSMENT IN THE CASE O F THE ASSESSEE CAN ONLY BE MADE WHERE AFTER PASSING OF THE ORIGINAL ASSESSMENT ORDE R SOME NEW MATERIAL OR FACTS COMES TO THE KNOWLEDGE OF THE AO EVIDENCING THE FACT THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT IN THE ASSESSMENT MADE. IT WAS P OINTED OUT THAT FROM THE RECORDED REASONS FOR REOPENING OF THE ASSESSMENT IT CAN BE S EEN THAT THE INFORMATION ON WHICH THE AO PROCEEDED TO REOPENING THE ASSESSMENT WERE A VAILABLE IN THE ASSESSMENT RECORDS OF THE AO. THUS ON THE VERY SAME MATERIALS ON WHICH THE ASSESSMENT U/S 143(3) OF THE ACT WAS FRAMED BY THE AO THE REOPENIN G OF THE ASSESSMENT WOULD AMOUNT TO CHANGE OF OPINION AND THEREFORE THE REASS ESSMENT NOTICE ISSUED WAS BAD IN ITA NO.1128 /KOL/2012 ITO,WARD-52(4), KOLKATA VS SRI AVI JIT NASKAR A.YR.2007-08 3 LAW. IT WAS FURTHER SUBMITTED THAT IN THE ASSESSMEN T FRAMED U/S 143(3) OF THE ACT THE AO HAD CONSIDERED THE AMOUNT OF EXPORT INCENTIVE OF RS.2,62,76,653/- IN THE COMPUTATION OF BOOK PROFIT U/S 115JB OF THE ACT AND HAD AFTER CONSIDERING AND EXAMINING THE SAME REDUCED THE IMPUGNED AMOUNT WHIL E COMPUTING THE BOOK PROFIT. SIMILARLY REGARDING THE DEDUCTION OF RS.2,06,47,310 /- TOWARDS WRITING OFF AMOUNT OF INTANGIBLE ASSETS THE AO HIMSELF HAS NOTED IN THE RECORDED REASONS FOR REOPENING THAT ON EXAMINATION OF THE ASSESSMENT RECORDS HE HAS COM E TO KNOW THAT THE SAID AMOUNT WAS DEDUCTED IN COMPUTING THE INCOME OF THE ASSESSE E. THUS THIS INFORMATION WAS ALSO AVAILABLE IN THE ASSESSMENT RECORDS TO THE AO. HENC E IT WAS SUBMITTED THAT THE REASSESSMENT ORDER PASSED U/S 147 OF THE ACT WAS BA D IN LAW. FOR THIS THE ASSESSEE RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF VIT VS KELVINATOR OF INDIA LIMITED REPORTED IN 320 ITR 561 (SC). 5. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESEE ANNULLED THE ASSESSMENT ORDER AND WHILE DOING SO HELD AS UNDER : - APPARENTLY, THE ASSESSEE HAD FURNISHED THE RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR U/S.139 OF THE ACT. HENCE THERE IS NO FAILURE ON THIS COUNT. NOW IT IS TO BE EXAMINED WHETHER THE ASSESSEE HAD FAILED TO DISC LOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. THE REASONS FOR REOPENING OF THE ASSESSMENT, AS REC ORDED IN THE IMPUGNED ASSESSMENT ORDER, ARE REPRODUCED HEREUNDER: 'ON EXAMINATION OF THE ASSESSMENT RECORDS, IT WAS S EEN THAT: (A) THE ASSESSEE HAD CLAIMED AND WAS ALLOWED A DEDU CTION OF RS.2,06,47,310/- TOWARDS WRITTEN-OFF AMOUNT OF INTANGIBLE ASSETS' AS HAD BEE N APPROPRIATED FROM NET PROFIT IN THE PROFIT & LOSS ACCOUNT AS 'EXTRAORDINARY ITEMS '. IN RESPECT OF INTANGIBLE ASSETS, BEING DEPRECIABLE ASSETS, DEPRECIATION U/S.32 OF TH E ACT IS ALLOWABLE @ 25% ON WDV AS SHOWN BELOW: ASST.YEAR OPENING WDV (RS.) RATE OF DEPRECIATION DEPRECIATION ALLOWABLE (RS.) CLOSING WDV (RS.) 2002-03 4,12,94,621 25% 1,03,23,655 3,09,70,965 2003-04 3,09,70,965 25% 77,42,742 2,32,28,224 IT IS THEREBY, SEEN THAT DEPRECIATION U/S.32 AMOUNT ING TO RS. 77,42,742/- IS ALLOWABLE AND NO DEDUCTION UNDER ANY OTHER PROVISION OF THE ACT W AS ALLOWABLE. CONSEQUENTLY, EXCESS CARRY FORWARD OF UNABSORBED DE PRECIATION TO THE TUNE OF RS.99,35,146/- (RS.18,90, 773/- FOR A..Y2002-03 AND RS.80,44,373/- FOR A.Y.2003-04) WAS ALLOWED IN THE ASSESSMENT ORDER. (B) AGAIN, IN THE COMPUTATION OF BOOK PROFIT U/S.1 15JB OF THE ACT, IT IS SEEN ITA NO.1128 /KOL/2012 ITO,WARD-52(4), KOLKATA VS SRI AVI JIT NASKAR A.YR.2007-08 4 THAT AN AMOUNT OF RS.2, 62,76,653/- HAD BEEN REDUCED FROM THE NET PROFIT AS PER PROFIT AND LOSS ALC ON ACCOUNT OF ADJUSTMENT FOR HYPOTHETICAL INCOME CREDITED TO THE PROFIT AND LOSS ALE OF THE YEAR AS PER NOTE 2 OF PART B OF SCHEDULE V TO THE AUDITED ACCOUNTS. SINCE THE SAID ITEM. DOES NOT FALL WITHIN THE SCOPE OF NEGATIVE ADJUSTMENTS AS PROVIDED IN THE EX PLANATION BELOW SECTION 115JB(2) OF THE ACT, DEDUCTION OF THE ABOVE AMOUNT WAS NOT ADMISSIBLE IN. COMPUTING THE BOOK PROFIT U/S.115JB. MOREOVER, SINC E THE AMOUNT OF RS.10,,32,595/- DEBITED TO THE PROFIT & LOSS ALC ON ACCOUNT OF 'PROVISION FOR GRATUITY IS AN UNASCERTAINED LIABILITY AS PER CLAU SE 17 (I) OF THE TAX AUDIT REPORT, THE SAME WAS REQUIRED TO BE ADDED BACK TO A RRIVE AT THE BOOK PROFIT. THIS RESULTED IN UNDER-ASSESSMENT OF THE BOOK PROFI T BY AN AMOUNT OF RS.2,73,09,248/-. IN VIEW OF THE ABOVE-STATED UNDE RASSESSMENT OF INCOME, NOTICE U/S.148 WAS ISSUED ON 31.03. 2010. IN RESPONSE, THE ASSESSEE FILED A LETTER DATE D 20.04.2010 REQUESTING THAT THE RETURN FILED U/S.139 MAY BE TR EATED AS RETURN FILED IN RESPONSE TO NOTICE U/S.148. ' .' FROM THE REASONS FOR REOPENING, REPRODUCED ABOVE, I T IS OBSERVED THAT THE AO. REOPENED THE ASSESSMENT U/S.147 ON THE BASIS OF THE FACTS THAT C AME TO HIS NOTICE FROM THE EXAMINATION OF THE ASSESSMENT RECORDS. THAT MEANS, THE FACTS ON WHICH THE A.O. FORMED HIS SATISFACTION THAT , INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT FOR THE YEAR UNDER APPEAL, WERE ALL AVAILABLE ON THE ASSESSMENT RECORDS AND SUCH SATISFACTION WAS NOT BASED ON ANY NEW FACTS OR ANY CHANGE IN LAW. THERE IS NO DISPUTE THAT THE AS SESSEE HAD REDUCED AN AMOUNT OF RS.2,62,76,653/- ON ACCOUNT OF ADJUSTMENT FOR HYPOTHETICAL INCOME CR EDITED TO INCOME, FROM THE FIGURE OF NET PROFIT AS PER ITS PROFIT AND LOSS ACCOUNT WHILE COM PUTING ITS BOOK PROFIT U/S 115JB OF THE ACT. THE AO. HAD, WHILE COMPLETING THE ASSESSMENT U LS 143, COMPUTED BOOK PROFIT U/S 115JB AND IN SUCH COMPUTATION HAD T ALSO REDUCED THE IMPUGNED AMOUNT OF RS.2,62,76,653/ - . ALSO THE ASSESSEE HAD CLAIMED AND WAS ALLOWED IN THE ASSESSMENT COMPLETED U/S 143, A DEDUCTION OF RS.2,06,47,310/- TOWARDS 'WRITTEN- OFF AMOUNT OF INTANGIBLE ASSETS' AS HAD BEEN APPROPRIATED FROM NET PROFIT IN THE PROFIT & LOSS ACCOUNT AS 'EXTRAORDINARY ITEMS'. THE A.O. HIMSELF HAS NOTED IN THE REASONS FOR REOPENING THAT HE NOTICED THE ABOVE FACTS 'ON EXAMINATION OF THE ASSESSMENT RECORDS', WHICH MEANS THAT THOSE FACTS WERE ALL AVAILABLE ON RECORD OF THE AO. BEFORE THE REOPENING. THE REOPENI NG WAS NOT DONE ON THE BASIS OF ANY NEW MATERIAL. THIS SHOWS THAT THERE WAS NO FAILURE ON PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELEVANT TO THE ASSESS MENT. WHEN THE A.O. HIMSELF HAD COMPUTED ASSESSEE'S BOOK PROFIT U/S 115JB AND ALLOWED DEDUCTION OF RS.2,06,47,310/- TOWARDS 'WRITTEN-OFF AMOUNT OF INTANGIBLE ASSETS' U NDER SCRUTINY ASSESSMENT, IT ENTAILS THAT HE HAD APPLIED HIS MIND TO THE MATTER AND HAD FORMED A VIEW THAT HYPOTHETICAL INCOME CREDITED TO INCOME WAS DEDUCTIBLE FROM NET PROFIT AS PER PROFIT & LOSS ACCOUNT FOR COMPUTING BOOK PROFIT U/S 115JB AND DEDUCTION OF RS.2,06,47,310/- TOWARDS WRITTEN OFF AMOUNT OF INT ANGIBLE ASSETS WAS ALLOWABLE. FORM THE DISCUSSION MADE ABOVE IT IS APPARENT THE REOPENING HAD NOT BEEN MADE ON THE BASIS OF ANY NEW MATERIAL OR FACTS BUT ON THE BASIS OF APPLICATI ON OF MIND TO THE SAME SET OF FACT WHICH HAS ALREADY BEEN CONSIDERED WHILE PROCESSING RETURN AS WELL AS IN THE ORIGINAL ASSESSMENT ORDER. THE LAW IS NOW WELL SETTLED THAT THE ASSESSMENT CAN NOT BE REOPENED ON THE BASIS OF CHANGE OF OPINION. THE HONBLE SUPREME COURT OF IND IA IN THE CASE OF CIT V. KELVINATOR (INDIA) LT.D. (2010) 320 ITR 561 HAS HELD THAT THE CONCEPT OF CHANGE OF OPINION ON THE PART OF THE AO REOPEN AN ASSESSMENT DOES NOT STAND OBLIT ERATED AFTER THE SUBSTITUTION OF SECITON 147 OF THE ACT THE DIRECT TAX LAWS (AMENDMENT) ACT 1987 AND 1989. AFTER THE AMENDMENT ITA NO.1128 /KOL/2012 ITO,WARD-52(4), KOLKATA VS SRI AVI JIT NASKAR A.YR.2007-08 5 THE AO HAS TO RECORD REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT BUT THIS DOES NOT IMPLY THAT THE AO REOPEN THE ASSESSMENT ON MERE CHA NGE OF OPINION. THE CONCEPT OF CHANGE OF OPINION MUST BE TREATED AS AN IN BUILT TEST TO CHECK THE ABUSE OF POWER. IN VIEW OF THE APEX COURT DECISION (SUPRA) ANY REOPENING OF ASSESS MENT HAS TO BE BASED ON TANGIBLE MATERIAL RATHER THAN A MERE CHANGE OF OPINION HIGH COURT OF MADRAS, IN THE CASE OF SRI SAKTHI TEX TILES LTD. VS. JCIT, APPEAL NO.V NOS.2498 TO 2500 OF 2000, DECIDED ON AUGUST, 4,M 20 10 HAS LAID DOWN AS FOLLOWS :- IN ORDER TO FALL WITHIN THE PROVISO TO SECTION 14 7 OF THE ACT APART FORM STATING THAT THERE WERE REASONS FOR THE AUTHORITY TO BELIEVE THA T THERE HAS BEEN ESCAPEMENT OF CHARGEABLE INCOME, IT SHOULD HAVE ALSO BEEN RECORDE D THAT SUCH ESCAPEMENT WAS DUE TO THE FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND T RULY ALL MATERIAL PARTICULARS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. SUCH A REC ORDING IS ABSOLUTELY MANDATORY AS PER THE PROVISION AND AS LAID DOWN IN VARIOUS JUDGMENTS . IN THIS REGARD, I MAY REFER TO SOME OF THE JUDGEMENTS RELIED ON BY THE LEARNED COUNSEL APPEARING ON EITHER SIDE. THE EARLIEST JUDGMENT ON THIS POINT IS A JUDGMENT RENDERED BY A CONSTITUTION BENCH OF THE HONBLE SUPREME COURT IN CALCUTTA DISCOUNT COMPANY LIMITED V. INCOME-TAX OFFICER, 1961 (41) ITR 191 SC WHEREIN WHILE DEALING WITH SECTION 34 OF THE INDIAN INCOME-TAX ACT, 1922 [IN PARI MATERIAL TO SECTION 147 OF THE INCOME -TAX ACT, 1961] THE HONBLE SUPREME COURT HAS HELD AS FOLLOWS :- TO CONFER JURISDICTION UNDER THIS SECTION TO I SSUE NOTICE IN RESPECT OF ASSESSMENTS BEYOND THE PERIOD OF O FOUR YEARS, BUT WITHIN A PERIOD OF EIGHT YEARS FROM THE END OF THE RELEVANT YEAR TWO CONDITIONS HAVE TH EREFORE TO BE SATISFIED. THE FIRST IS THAT THE INCOME-TAX OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME, PROFITS AND GAINS CHARGEABLE TO INCOME-TAX HAVE BEEN UNDER ASSESSED. THE SECOND IS THAT HE MUST HAVE ALSO REASON TO BELIEVE THAT SUCH UNDER ASSESSMENT HAS OCCURRED BY REASON OF EITHER (I) OMISSION OR FAILURE ON THE PART OF AN ASSESSEE TO M AKE A RETURN OF HIS INCOME UNDER SECTION 22, OR (II) OMISSION OR FAILURE ON THE PART OF AN ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSME NT FOR THAT YEAR. BOTH THESE CONDITIONS ARE CONDITIONS PRECEDENT TO BE SATISFIED BEFORE THE INCOME-TAX OFFICER COULD HAVE JURISDICTION TO ISSUE A NOTICE FOR THE ASSESSMENT O R REASSESSMENT BEYOND THE PERIOD OF FOUR YEARS, BUT WITHIN THE PERIOD OF EIGHT YEARS, F ROM THE END OF THE YEAR IN QUESTION.. THE ONLY DIFFERENCE BETWEEN THE OLD ACT AND THE PRE SENT ACT IS THAT IN THE OLD ACT THE MAXIMUM PERIOD OF LIMITATION WAS EIGHT YEARS, WHERE AS THE SAME IS SIX YEARS IN THE PRESENT ACT. EXCEPT THE ABOVE, BOTH THE PROVISIONS VIZ. SECTION 34 OF THE INDIAN INCOME TAX ACT, 1922 AND SECTION 149 OF THE INCOME-TAX ACT , 1961 ARE VERBATIM THE SAME. THUS, THE AFORESAID JUDGMENT OF THE HONBLE SUPREME COURT HOLDST HE FILED. A READING OF THE ABOVE JUDGMENT WOULD MAKE IT CLEAR THAT UNLESS THE ABOVE TWIN CONDITIONS ARE SATISFIED, THE NOTICE ISSUED UNDER SECTION 148 OF THE ACT IS W ITHOUT JURISDICTION AND ON THAT GROUND ABOVE THE NOTICE IS LIABLE TO BE QUASHED. THE SCOPE AND EFFECT OF SECTION 147 AS SUBSTITUTED WITH EFFECT FROM APRIL 1, 1989, AS ALSO SECTION 148 TO 152 ARE SUBSTANTIALLY DIFFERENT FROM THE PROVISION AS THEY STOOD PRIOR TO SUCH SUBSTITUTION. UNDER THE OLD PROVISIONS OF SECT ION 147, SEPARATE CLAUSES (A) AND (B) LAID DOWN THE CIRCUMSTANCES UNDER WHICH INCOME ESCA PING ASSESSMENT FOR THE PAST ASSESSMENT YEARS COULD BE ASSESSED OR REASSESSED. T O CONFER JURISDICTION UNDER SECTION 147(A ) TWO CONDITIONS WERE REQUIRED TO BE SATISFIE D FIRSTLY THE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME PROFITS OR GAINS CHARGEABLE TO INCOME-TAX HAVE ESCAPED ASSESSMENT, AND SECONDLY HE MUST ALSO HAVE REASON TO BELIEVE THAT SUCH ESCAPEMENT HAS OCCURRED BY REASON OF EITHER (I) OMI SSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FA CTS NECESSARY FOR HIS ASSESSMENT OF THAT YEAR. BOTH THESE CONDITIONS WERE CONDITIONS PRECEDE NT TO BE SATISFIED BEFORE THE ITA NO.1128 /KOL/2012 ITO,WARD-52(4), KOLKATA VS SRI AVI JIT NASKAR A.YR.2007-08 6 ASSESSING OFFICER COULD HAVE JURISDICTION TO ISSUE NOTICE UNDER SECTION 148 READ WITH SECTION 147(A) BUT UNDER THE SUBSTITUTED SECTION 14 7 EXISTENCE OF ONLY THE FIRST CONDITION SUFFICES. IN OTHER WORDS IF THE ASSESSING OFFICER F OR WHATEVER REASON HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT IT CONFE RS JURISDICTION TO REOPEN THE ASSESSMENT. IT IS HOWEVER TO BE NOTED THAT BOTH THE CONDITIONS MUST BE FULFILLED IF THE CASE FALLS WITHIN THE AMBIT OF THE PROVISO TO SECTI ON 147 IN SITA WORLD TRAVEL (INDIA) LTD. V. CIT[2004] 140 TAXMAN 381 (DELHI) THE HON'BLE L DELHI HIGH COURT OBSERVED AS FOLLOWS: ' FROM THE ORIGINAL ASSESSMENT ORDERS AS WELL AS OR DER MADE BY THE APPELLATE AUTHORITY, IT IS VERY CLEAR THAT THE ASSESSING OFFI CER WAS WELL AWARE ABOUT THE PRIMARY FACTS, NAMELY, THE CLAIM MADE BY THE ASSESS EE, THE CIRCUMSTANCES UNDER WHICH THE CLAIM WAS MADE AND THE PROVISIONS O F LAW WHICH COULD BE APPLIED WHILE GRANTING THE BENEFITS. A DECISION MAY BE WRONG OR RIGHT IS NONE OF THE CONCERN OF THE SUBSEQUENT OFFICER. IF THE PR IMARY FACTS WERE NOT AVAILABLE OR THERE WAS CONCEALMENT OR THERE WAS NO APPLICATION OF THE MIND AT ALL THEN, A CASE FOR REOPENING THE ASSESSMENT COULD BE MADE OUT. BUT, WHEN ALL THE FACTS WERE PLACED BEFORE THE ASSESSING OFFICER AND THE ASSESSING OFFICER CONSCIOUSLY CONSIDERED THE FACTS AND ARRIVED AT A D ECISION THEN CAN IT BE REOPENED MERELY BECAUSE SUBSEQUENTLY HE CHANGES HIS OPINION OR SOME OTHER OFFICER TAKES A DIFFERENT VIEW? WE THINK NOT.' IN M.M.T.C. LIMITED VS DY. COMMISSIONER OF 1. TAX O N 28 SEPTEMBER, 2007 THE HON'BLE DELHI HIGH COURT MADE FOLLOWING OBSERVATION S: ' WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION S IN THE LIGHT OF MATERIAL PLACED BEFORE US. THE REASSESSMENT HAS BEEN CHALLENGED BY THE ASSESSEE MAINLY ON THREE GROUNDS. FIRSTLY, THAT THE IMPUGNED REASSESSMENT PR OCEEDINGS ARE BASED ON MERE CHANGE OF OPINION AND, THEREFORE, NOT PERMISSIBLE IN LAW. SECONDLY, NO REASONABLE BELIEF WAS FORMED FOR INITIATING REASSESSMENT PROCEEDINGS TO H OLD THAT INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT WHICH IS A PREREQUISITE CONDITIO N FOR VALID INITIATION OF REASSESSMENT PROCEEDINGS. THIRDLY AND LASTLY, REASSESSMENT PROCE EDINGS ARE INVALIDLY INITIATED AS ACCORDING TO PROVISO TO SECTION 147 REASSESSMENT PR OCEEDINGS CANNOT BE VALIDLY INITIATED BEYOND THE PERIOD OF 4 YEARS FROM THE END OF ASSESSMENT YEAR ONLY IN THE CIRCUMSTANCES WH ERE THERE IS FAILURE ON THE PART OF THE AS,SESSEE TO DI SCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT.' AS HAS BEEN DISCUSSED EARLIER IN THIS ORDER, IT IS APPARENT THAT THE REOPENING IN THE INSTANT CASE HAD NOT BEEN MADE ON THE BASIS OF ANY NEW MATERIAL OR FACTS BUT ON THE BASIS OF FRESH APPLICATION OF MIND TO THE SAME SET OF FACT W HICH HAS ALREADY BEEN CONSIDERED WHILE PROCESSING THE RETURN AS WELL AS IN THE ORIGINAL AS SESSMENT ORDER. IN LIGHT OF THE FACTS OF THE CASE AND THE CASE LAWS DISCUSSED ABOVE, I HOLD THAT THE INITIATION OF PROCEEDING U/S.147 AFTER THE EXPIRY OF FOUR YEARS IS IN CONTRAVENTION TO THE PROVISO TO SECTION 147 AND AS SUCH BAD IN LAW. THE RE-ASSESSMENT PROCEEDING CONSEQUENT TO SUC H INITIATION IS, THEREFORE, ANNULLED. GROUND NO.1 OF THE APPEAL IS, HENCE, ALLOWED . 6. THE LD. DR SUPPORTED THE ORDER OF THE AO WHEREAS THE LD. AR SUPPORTED THE ORDER OF THE LD. CIT(A). ITA NO.1128 /KOL/2012 ITO,WARD-52(4), KOLKATA VS SRI AVI JIT NASKAR A.YR.2007-08 7 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE MATERIALS AVAILABLE ON RECORD. THE UN DISPUTED FACTS OF THE CASES ARE THAT THE ORIGINAL ASSESSMENT U/S 143(3) OF THE ACT IN TH E INSTANT CASE WAS COMPLETED ON 08.03.2006. THEREAFTER NOTICE U/S 148 OF THE ACT WA S ISSUED BY THE AO ON 31.03.2010.THE PRESENT ASSESSMENT YEAR INVOLVED IN THIS APPEAL IS A.YR. 2003-04 AND THEREFORE THE NOTICE ISSUED IS BEYOND FOUR YEARS FR OM THE END OF THE RELEVANT ASSESSMENT YEAR 2003-04 AND ACCORDING TO THE PROVIS O OF SECTION 147 OF THE ACT THE REOPENING OF THE ASSESSMENT CAN BE MADE BY THE AO W HERE ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY THE REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN U/S 139 O F THE ACT OR IN RESPONSE TO NOTICE ISSUED UNDER SUB-SECTION (1 ) OF SECTION 142 OR SEC TION 148 OR DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. WE FIND THAT IN THE INSTANT CASE THE ASSESSEE HAS FILED RETURN OF I NCOME U/S 139(1) OF THE ACT. HOWEVER, WE FIND THAT THE REASONS FOR REOPENING OF THE ASSESSMENT AS QUOTED IN THE ORDER OF THE LD. CIT(A) IS AS UNDER :- THE REASONS FOR REOPENING OF THE ASSESSMENT, AS RE CORDED IN THE IMPUGNED ASSESSMENT ORDER, ARE REPRODUCED HEREUNDER: 'ON EXAMINATION OF THE ASSESSMENT RECORDS, IT WAS S EEN THAT: (A) THE ASSESSEE HAD CLAIMED AND WAS ALLOWED A DEDU CTION OF RS.2,06,47,310/- TOWARDS WRITTEN-OFF AMOUNT OF INTANGIBLE ASSETS' AS HAD BEE N APPROPRIATED FROM NET PROFIT IN THE PROFIT & LOSS ACCOUNT AS 'EXTRAORDINARY ITEMS '. IN RESPECT OF INTANGIBLE ASSETS, BEING DEPRECIABLE ASSETS, DEPRECIATION U/S.32 OF TH E ACT IS ALLOWABLE @ 25% ON WDV AS SHOWN BELOW: ASST.YEAR OPENING WDV (RS.) RATE OF DEPRECIATION DEPRECIATION ALLOWABLE (RS.) CLOSING WDV (RS.) 2002-03 4,12,94,621 25% 1,03,23,655 3,09,70,965 2003-04 3,09,70,965 25% 77,42,742 2,32,28,224 IT IS THEREBY, SEEN THAT DEPRECIATION U/S.32 AMOUNT ING TO RS. 77,42,742/- IS ALLOWABLE AND NO DEDUCTION UNDER ANY OTHER PROVISION OF THE ACT W AS ALLOWABLE. CONSEQUENTLY, EXCESS CARRY FORWARD OF UNABSORBED DE PRECIATION TO THE TUNE OF RS.99,35,146/- (RS.18,90, 773/- FOR A..Y2002-03 AND RS.80,44,373/- FOR A.Y.2003-04) WAS ALLOWED IN THE ASSESSMENT ORDER. (B) AGAIN, IN THE COMPUTATION OF BOOK PROFIT U/S.1 15JB OF THE ACT, IT IS SEEN THAT AN AMOUNT OF RS.2, 62,76,653/- HAD BEEN REDUCED FROM THE NET PROFIT AS PER PROFIT AND LOSS ALC ON ACCOUNT OF ADJUSTMENT FOR HYPOTHETICAL INCOME CREDITED TO THE PROFIT AND LOSS ALE OF THE YEAR AS PER NOTE 2 OF PART B OF SCHEDULE V TO THE AUDITED ACCOUNTS. SINCE THE SAID ITEM. DOES NOT FALL WITHIN THE ITA NO.1128 /KOL/2012 ITO,WARD-52(4), KOLKATA VS SRI AVI JIT NASKAR A.YR.2007-08 8 SCOPE OF NEGATIVE ADJUSTMENTS AS PROVIDED IN THE EX PLANATION BELOW SECTION 115JB(2) OF THE ACT, DEDUCTION OF THE ABOVE AMOUNT WAS NOT ADMISSIBLE IN. COMPUTING THE BOOK PROFIT U/S.115JB. MOREOVER, SINC E THE AMOUNT OF RS.10,,32,595/- DEBITED TO THE PROFIT & LOSS ALC ON ACCOUNT OF 'PROVISION FOR GRATUITY IS AN UNASCERTAINED LIABILITY AS PER CLAU SE 17 (I) OF THE TAX AUDIT REPORT, THE SAME WAS REQUIRED TO BE ADDED BACK TO A RRIVE AT THE BOOK PROFIT. THIS RESULTED IN UNDER-ASSESSMENT OF THE BOOK PROFI T BY AN AMOUNT OF RS.2,73,09,248/-. IN VIEW OF THE ABOVE-STATED UNDERASSESSMENT OF INC OME, NOTICE U/S.148 WAS ISSUED ON 31.03. 2010. IN RESPONSE, THE ASSESSEE FILED A LETTER DATE D 20.04.2010 REQUESTING THAT THE RETURN FILED U/S.139 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U/S.148. ' .' 7.1. THUS IT IS SEEN THAT IN THE RECORDED REASONS A S QUOTED ABOVE THERE IS NOT A WHISPER BY THE AO THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT DUE TO THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE ASSESSMENT YEA R UNDER CONSIDERATION. WE FIND THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF E.I.DUP OND INDIA LTD. VS DCIT (2013) REPORTED IN 351 ITR 299 (DEL) HAS HELD THAT SINCE T HE CASE OF THE ASSESSEE WAS A CASE OF PROPOSED REOPENING OF ASSESSMENT AFTER FOUR YEAR S FROM THE END OF THE RELEVANT ASSESSMENT YEAR 2005-06, IT WAS INCUMBENT TO THE AO TO DEMONSTRATE THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TR ULY DISCLOSED ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT. THE REASONS HAD NOT E VEN ALLEGED THAT THERE HAD BEEN A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ANY MATERIAL FACTS. FAILURE TO DISCLOSE ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT IS A CONDIT ION PRECEDENT FOR REOPENING OF AN ASSESSMENT BEYOND THE PERIOD OF FOUR YEARS. THEREFO RE, THE NOTICE WAS LIABLE TO BE QUASHED. 7.2. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF T HE HONBLE DELHI HIGH COURT IN OUR CONSIDERED VIEW THE REOPENING OF THE ASSESSMENT ON THE BASIS OF THE ABOVE RECORDED REASONS IS BAD IN LAW AND HENCE LIABLE TO BE QUASHED AND CONSEQUENTLY THE ORDER PASSED IN PURSUANCE TO SUCH NOTICE IS ALSO LI ABLE TO BE QUASHED. STILL FURTHER, WE FIND THAT THE LD. CIT(A) HAS GIVEN A FINDING THAT A LL MATERIAL FACTS WERE AVAILABLE ON THE ASSESSMENT RECORD ON THE BASIS OF WHICH THE REOPENI NG OF THE ASSESSMENT HAS BEEN MADE BY THE AO. THE LD. DR HAS BROUGHT NO MATERIAL ON RECORD BEFORE US TO CONTROVERT THIS FINDING OF THE LD. CIT(A). THE REOPENING OF TH E ASSESSMENT ON THE BASIS OF THE ITA NO.1128 /KOL/2012 ITO,WARD-52(4), KOLKATA VS SRI AVI JIT NASKAR A.YR.2007-08 9 VERY SAME MATERIALS WHICH WAS CONSIDERED WHILE PASS ING THE ORDER U/S 143(3) OF THE ACT TANTAMOUNT TO CHANGE OF OPINION AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS KELVINATOR OF INDIA LTD. (SUPRA). ON THAT ACCOUNT ALSO THE RE-ASSESSMENT ORDER PASSED BY THE AO IS LIABLE TO BE QUASHED. WE, THEREFORE, DO NOT FIND ANY GOOD AND JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) WHICH IS CONFIRMED AND THE GROUNDS OF APPEAL OF THE REVENUE ARE DISMIS SED. 8. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 07.06.2013. SD/- SD/- [ .#! $'# , ] [ .., ,, , ] [MAHAVIR SINGH ] [N.S.SAINI] JUDICIAL MEMBER ACCOUNTANT MEMBER ( (( (4 4 4 4) )) ) DATE:07.06.2013. R.G.(.P.S.) 6 0 .$$7 87(9- COPY OF THE ORDER FORWARDED TO: 1. M/S.GREENPLY INDUSTRIES LTD., 16A, SHAKESPEARE SARA NI, KOLKATA-700071. 2 A.C.I.T., CENTRAL CIRCLE-XI, KOLKATA 3 . CIT KOLKATA 4. CIT (A)-CENTRAL-III, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. /7 .$/ TRUE COPY, 62/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES